Is your Payroll Function Fit for Purpose Ahead of the New Tax Year?
The new tax year will be here before you know it. If you want your payroll department to run as smoothly and efficiently as possible, you’ll need the best systems and processes in place. That’s why the tax year end is an excellent time for a payroll system evaluation to make any necessary adjustments and ensure everything is in tip-top condition.
This blog explores what a great functioning payroll department looks like, especially when it comes to processes, resources and collaboration — which will help set you up for payroll success in 2023 and beyond.
Table of content
What does a properly functioning payroll department look like?
A well-oiled payroll department must be compliant, accurate, and timely. Without these three components, you’re making the process more stressful for everyone involved. If you head up payroll, it’s your job to keep payroll functioning at its most efficient. That way, you don’t incur additional costs in the long run.
Staying compliant with payroll
Non-compliance means fines, penalties and loss of employee confidence, so your department must remain compliant with all relevant payroll regulations for these reasons. That includes following all the necessary guidelines for taxes and other deductions.
Being aware of changes in legislation and deductions means your payroll processes are always up-to-date. For example, in November 2022, the UK government announced that the basic rate of income tax will now be cut from 20% to 19% from April 2023. Keeping on top of changes like these, especially in the run-up to the end of the tax year, is crucial for efficient payroll management.
Learn more about what it takes to remain payroll compliant.
Accuracy counts in payroll
Errors can still happen, no matter how meticulous you are. For example, let’s say a team leader forgets to notify payroll of a promotion within their team, these are payroll errors that aren’t directly your fault, but you’ll be the one lumbered with sorting it out.
Research shows that 35% of payroll errors happen because of manual data entry. Relying on manual techniques can result in incorrect pay, which inevitably causes frustration among employees.
Businesses can avoid these errors by ensuring strict data entry protocols, regularly auditing their payroll process, and investing in payroll software to eliminate human error.
Be timely when processing payroll
To ensure your payroll department functions correctly, you must pay all employees on time and meet all other submission deadlines, such as RTI and pension. While this is important all year round, this becomes especially critical around the end of the tax year.
According to a survey, 76% of businesses admitted to paying their employees incorrectly or late on more than one occasion over a 12-month period. To avoid miscalculating pay or missing payment deadlines, you must first analyse your current payroll setup — what is causing you to make these mistakes? For example, you might identify a knowledge gap you can quickly fill with training or the use of legacy systems that are causing duplicate or incorrect data.
Finding the cause of these mistakes can help you put processes in place to ensure these mistakes don’t happen again. The more frequently you make these mistakes, the less trust your employees have in your business and its ability to pay correctly and on time. It becomes unnecessarily stressful for everyone!
Collaboration is a must for effective payroll
Payroll affects everyone in a business. Not just because everyone gets paid but because you rely on managers to update employee data such as overtime and salary updates, and you rely on employees to input accurate expense data.
Without cross-departmental collaboration, your payroll processes can become fragmented, leading to easy, avoidable mistakes and frustration.
You can improve collaboration by helping departments where you can. For example, you can provide useful data to help them with resource allocation, help departments benchmark salaries to retain and attract the best talent and give them the insights they need to make big-picture business decisions.
PayFit Top Tip:
By staying up-to-date on the latest payroll regulations and ensuring you meet all tax year-end deadlines, you can achieve an efficient payroll process for the new tax year. That means the following tax year becomes less stressful and more manageable — which is what we’re all striving for, right?
Assessing your current setup: 4 payroll KPIs you should measure
Before you start improving your payroll processes, you must first review your current payroll setup. Start by conducting a payroll audit to help you review each payroll process — what part of the process is causing problems? Are the errors down to humans, or are they due to poor software systems?
Once you’ve uncovered your problem areas, you can start to build and implement a plan to action change, whether it’s adjusting your workforce plans, re-training staff, or investing in new software.
Make sure you don’t rush into making changes before mapping out a plan.
As part of your plan to continuously monitor and better your processes and to help you get a holistic view of your setup, here are a handful of payroll performance metrics or key performance indicators (KPIs) you can track and measure.
1. Payroll processing time
Track the time it takes to process payroll, from data entry to distribution of paychecks. For reference, it should usually take only a couple of days to process this with automated payroll software.
2. Error rate
You should try and reduce the error rate to as little as possible — to do this, you must track your current error rate when processing your payroll. You can then easily pinpoint the source of errors and implement processes to combat them.
3. Compliance rate
Track the rate of compliance with payroll regulations. If you’re consistently missing HMRC deadlines, you need to understand why so you can make essential changes to your procedures going forward.
4. Employee satisfaction
Track employee satisfaction by checking in with employees regularly. How satisfied your employees are is a crucial part of your payroll process, or at least it should be. Employees keep the business running, and if they’re unhappy, word gets around, which can negatively affect employee retention and brand reputation.
By measuring these KPIs, finance teams can identify areas for improvement and make data-driven decisions to optimise their payroll setup for now and into the future.
How automated payroll software can help
With changes in regulations increasing around the tax year end and the many moving parts involved, managing payroll can be challenging for any HR and finance department. Software removes the burdens that menial and repetitive tasks bring to the table and ultimately keeps your payroll department running like clockwork, eliminating clumsy human errors and ensuring data accuracy and compliance.
Payroll software removes the headache commonly associated with running payroll.
Automated payroll software eliminates the need for manual data entry, reducing the risk of errors and speeding up the payroll process. With PayFit, you can finalise payroll in just a few clicks.
Reduced compliance risk
Software like this stays up-to-date with the latest regulations, which reduces the risk of fines and penalties, especially around the end of the tax year. If you’re facing compliance challenges, you’re not alone — a study found that 43% of people who manage payroll say it’s one of their biggest payroll pain points, too.
Improved data security
The safety of your data is our top priority at PayFit — that’s why our software includes built-in security features — we’re ISO 27001 certified by an independent auditor. So by using our software, you can sleep a little easier at night.
Better insights and reporting
Payroll software gives you access to real-time data and detailed reports, allowing payroll managers to track and analyse payroll insights. Being able to produce accurate reports means you keep stakeholders informed, always.
With the increasing complexity of payroll systems and the changes to regulations, automated payroll software can be a valuable tool for payroll managers to improve efficiency, reduce compliance risk, improve data security, and gain better insights and reporting. So, what are you waiting for?
Not sure what you should be looking for in payroll software? No bother — check out our ultimate payroll software guide (it’s free and can be in your inbox in two seconds!).